in the USA, you're allowed to sell bitcoins for cash without worrying about money transmission laws (AML/KYC)---up until the point that you are considered "a business":


does anyone know what frequency and volume thresholds might trigger FINCEN registration and reporting requirements? have there been any precedents set in the last few years? FINCEN's guidance is pretty vague.

take this case from 2017: https://www.justice.gov/usao-wdmo/pr/nixa-man-pleads-guilty-illegal-bitcoin-exchange


5 transactions over 1.5 years (for amounts as small as $1k) doesn't seem like very much. the press release highlights the fact that he advertised/represented himself as an exchanger---is that the more significant part?

going back to the quote from marco santori above, he says "you have to accept all comers". does that imply that if you are only contacting advertisers and not advertising yourself, and not representing yourself as an exchanger, that you won't be construed as a business?

Yes.

ChipMixer chip creation and Wasabi CoinJoin are distinct and easy to recognize.
If you spot Wasabi CoinJoin - you know that [simplified] owner of one of inputs is owner of one of outputs.
If you spot ChipMixer chip creation - you know that owner of one of inputs is owner of some of chips - created in the past or in the future.

I'm not a lawyer or an expert, but I think my statement explains why funds held by Silk Road were confiscated and not returned to their owners. In the U.S., your property can be confiscated if it is involved in crime whether you are involved in the crime or not. Maybe banks are a special case and maybe not, or maybe it would be political suicide to confiscate the assets of a bank so it isn't done.


What the government did there is a civil forfeiture.  In a civil forfeiture the "defendant" is the property - i.e. the bitcoins.  The government only needs probable cause to execute the seizure of the bitcoins.  Then any person who wants to make a claim against the coins must file as an interested party.  I do not know, but seriously doubt, anyone filed as an interested party in an effort to get their coins back.  Those coins seized were ones seized ON silk road as opposed to ones that had already left the market place.  Civil forfeiture has a much lesser burden.  Probable cause to seize but the the burden is on the government to show by preponderance of the evidence the funds are connected to criminal activity should someone claim an interest in the property.  However most of the time no one claims an interest and as in that case the government just wins by default.

Every centralized exchange will have something buried in their Terms of Service saying that if you trigger some unspecified automatic algorithm which they will never provide any details of, then your account will be frozen/locked/suspended pending review and/or you handing over ridiculous amounts of private information. By signing up to the exchange, you signal your acceptance of these terms, and grant the exchange the ability to do whatever they like to you, your account, and your coins.

If the marketplace is committing a crime, then any money or property held or managed by the marketplace would be involved in the crime. While you might not have transacted directly with the marketplace, the bitcoins you received came from it.

One interesting bit of complexity comes from the fact that once a UTXO is spent, the bitcoins in it can no longer be distinguished from other bitcoins. That is why "taint" is always a percentage. This is similar to the problem of identifying tainted money in a bank account. However, while money is legally fungible (in the U.S.), bitcoins are not, and so they must be treated differently. I look forward to seeing how laws are applied and misapplied to this situation.

No one is going to be able to say for sure unless they work for one of these blockchain analysis companies and are familiar with their various algorithms, analyses, and outcomes. What we do know is that some exchanges and blockchain analysis companies label coins as "tainted" for completely trivial reasons. Some say that any coins which have been mixed are tainted. Some say that any coins which have been coinjoined are tainted. Some say that any coins which have come from casinos, or sportsbooks, or darknet markets, etc., are tainted.

As you say, if you trace any bitcoin back far enough, then chances are it has been involved in some kind of activity which would be deemed as "tainted". But again, we don't know how far back these companies look. What if the bitcoin came from a darknet market 10 transactions ago? What about 100? What about 1000? Is it still tainted? What if it has been combined with some "clean" bitcoin in a transaction? Are all the outputs of that transaction now tainted? Or perhaps they are only 50% tainted? What if those outputs and combined again? These analyses are completely arbitrary, and in many cases, completely meaningless.

Often the best answer to a question like this is a practical one - which services or exchange are you trying to use which is passing arbitrary judgement about the "taintedness" of your bitcoin? Can you transition to a different one?